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Demanding Social Responsibility from All Organizations

Tags: CSR , Civil Society , Corporation , Private Sector , Governance

Seki, Masao

February 18, 2015

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The weakening of the government sector has highlighted the growing need for the private companies to tackle such key social issues as climate change and human rights abuses. Indeed, rather than act as a drag on sustainable development, businesses are now moving to promote responsible behavior, notes Masao Seki of Sompo Japan, and global-scale initiatives are being advanced to give the private sector a bigger problem-solving role.

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CSR in a Global Context

The ideal of “sustainable development”—solving environmental problems and dealing with the issue of poverty at the same time—was set forth at the Earth Summit (United Nations Conference on Environment and Development) in 1992. More than 20 years have passed since this lofty pronouncement, but prospects for its realization seem to have receded in the interim.

Along with climate change, we have seen a marked increase in the frequency of extreme weather. The sustainability of the environment, far from improving, has deteriorated to a critical degree. And while the number of people living in extreme poverty around the world has started to decline, as measured by statistics, the globalization of markets and labor has led to greater inequality in the distribution of wealth, with domestic income gaps widening in both the developing and advanced countries. So poverty has actually become more widespread.

On the political front, the shift in the international power balance has left the world leaderless, with no country capable of reconciling differences regarding the environment and development on its own. It has become difficult to achieve the ideal of sustainable development through political leadership. And it appears doubtful that traditional forms of global governance, relying mainly on national governments, can produce solutions for global issues.

The weakening of the government sector was highlighted by an event at COP 19 (19th Conference of the Parties to the United Nations Framework Convention on Climate Change) in November 2013. The decline of political leadership has been painfully visible in recent years at international forums dealing with climate change, where political negotiations have shown no sign of leading to solutions. At COP 19 in Warsaw, the representatives of the major nongovernmental organizations that have long been playing a key role in the negotiation process walked out of the conference en masse in protest as it was drawing to an inconclusive end. This was an unprecedented gesture.

Meanwhile, even as government-level negotiations became bogged down, there was a new development at COP 19 indicative of a shift in global governance, namely, the visible presence of the corporate sector, which had previously been absent from the COP process. The official program for the 2013 conference included a pair of first-ever events in this connection: the Caring for Climate Business Forum (November 19–20) and the high-level COP Presidency Business Dialogue (November 20, see photo). “Caring for Climate” is an initiative by the UN Global Compact, the UN Environment Program, and the secretariat of the UN Framework Convention on Climate Change (UNFCC) aimed at advancing the role of business in addressing climate change. In addition to organizing the two-day business forum on the occasion of COP 19, Caring for Climate prepared a report titled “Guide for Responsible Corporate Engagement in Climate Policy.” So far the business world has resisted regulations and acted as a drag on policy initiatives for sustainable development. This must change. Corporations need to get actively involved on the problem-solving side. The new events at COP 19 showed them doing so.

 Speakers and participants at the COP Presidency Business Dialogue, held as part of the COP 19 program on November 20, 2013. (Photo by the author)
Speakers and participants at the COP Presidency Business Dialogue, held as part of the COP 19 program on November 20, 2013. (Photo by the author)

So, even as political leadership is weakening, we can see a search for a new form of global governance, one in which various nonstate actors participate in the quest for sustainable development. It is hoped in particular that businesses will play a greater role in this connection than they have up to now. We need to consider corporate social responsibility in this global context.

In 2010 the International Organization for Standardization (ISO) issued a set of international guidelines for social responsibility, ISO 26000, that integrates the ideals of social responsibility and sustainable development into business management. This means including consideration for society and the environment as an element of corporate strategy and as part of their everyday decision-making and operating processes. Social and environmental concerns are to be made an essential part of the corporation’s core business. And the communication from the European Commission in 2011 defining CSR as “the responsibility of enterprises for their impacts on society” called on businesses to maximize the creation of shared value and to prevent and mitigate the possible adverse impacts from their activities. Businesses are now being called on to address global issues through their core activities and to be the source not of problems but of solutions.

CSR in Japan

When people talk about corporate social responsibility in Japan, they often refer to the sanpo-yoshi (“three-way good”) precept handed down through the generations by the Omi (now Shiga Prefecture) merchants of the Edo period (1603–1868). The secret of success, according to this precept, is to do business in a way that is good for three parties, namely, the buyer, seller, and society. It is a concept that meshes with the contemporary idea of CSR, calling on those who do business not just to seek profits for themselves but also to contribute to the development of society and to seek prosperous coexistence with others.

This is a positive element of Japanese tradition and should be preserved, but it is not identical to today’s CSR, which needs to be understood in the global context set forth above. CSR is not a static ideal aimed at maintaining good relations with existing stakeholders. It calls on enterprises to play an active role in generating changes in order to solve problems.

It was in 2003 that some Japanese consumer electronics manufacturers and other firms with operations in Europe first established organizational units explicitly tasked with the promotion of CSR, so this was dubbed “year one” for Japanese CSR. The following year, Keidanren (Japan Business Federation) substantially revised its Charter of Corporate Behavior, adding content in line with global trends in CSR. For several years after 2003 there was quite a boom in CSR in Japan, and it spread at a dramatic pace through the business world. Japan came to occupy a leading position internationally in terms of the share of companies issuing sustainability reports, and Japanese companies undertook independent initiatives to implement CSR while also following the latest global trends in this field.

A major difference between Japanese CSR and CSR as practiced in Western countries, though, is the level of involvement by corporate stakeholders. Japanese firms have moved to implement CSR on their own initiative, not in response to pressure from their stakeholders. It is rare in Japan for companies to become embroiled in sharp conflicts with NGOs and other civil society organizations. The government in Japan, unlike the authorities in Europe, has not come out with a systematic set of CSR policies, nor has it become strongly involved in this field. And Japanese institutional investors have not shown active interest in the concept of socially responsible investment (SRI); as a result, the volume of such investment in Japan is far smaller than in Europe and the United States.

Generally speaking, Japan’s CSR is characterized by the weakness of pressure on corporations from their stakeholders, in sharp contrast to the situation in Europe and North America, where major enterprises have struggled with fierce adversarial engagement from stakeholders—NGOs in particular. This is a reflection not just of differences in the maturity of the civil sector but also of Japan’s cultural and social climate favoring coexistence and harmony over conflict.

The relative lack of engagement from civil society may be perceived as a weakness of Japanese CSR, but it can also be turned into a strength. According to the results of the CSR survey conducted by the Tokyo Foundation, Japanese companies take a positive view of collaboration with stakeholders, and 73% are already working with them. The main reason cited for such collaboration was the hope of learning from stakeholders’ experience and know-how.[1] A series of surveys by Keidanren shows that the share of corporations that have collaborated with nonprofit organizations has been rising by 10 percentage points every three years and has recently topped 50%.[2] These results indicate that Japanese corporations are actively establishing cooperative ties with civil society to address social issues. They should continue to develop these constructive relationships and turn them into strengths.

The Tokyo Foundation survey found that Japanese corporations are focusing their CSR on not just domestic issues but also issues outside of Japan in such areas as the environment, human rights, and poverty and are starting to take concrete initiatives to address those issues. And they are eagerly seeking to improve their CSR by learning from international practices. But they tend to hold back from direct involvement at the international level in implementing initiatives and drafting norms and policy proposals. Japanese companies will need to show leadership in this respect, participating more actively in international discussions and sharing the lessons of their own CSR activities with others.

Mainstreaming CSR

The concept of CSR is now known around the world, but in terms of content it is still developing. Advanced cases are small in scale and are incapable of having an impact big enough to set off social reforms. There is a need to expand such efforts and turn CSR into a mainstream social endeavor. I believe the following three points are keys to the future development of CSR:

(1) Stronger corporate leadership

The World Business Council for Sustainable Development (WBCSD) was launched following the Earth Summit in 1992 to serve as a voice for policy proposals from the business world, and it has long played a leading role in this connection. In 2013 its chairmanship was assumed by Paul Polman, chief executive officer of Unilever, a company that has been at the forefront of global CSR. Based on its long-range Vision 2020, last year WBCSD, in a joint effort with the think tank Stockholm Resilience Center, formulated Action 2020, a plan based on scientific findings, and presented it as part of the policy dialogue at COP 19.

Meanwhile, the UN Global Compact now has more than 12,000 signatories and has become the world’s biggest CSR initiative. At the 2012 United Nations Conference on Sustainable Development (Rio +20), the Global Compact organized a four-day, 120-session corporate sustainability forum that 2,700 people attended. This raised the profile of the Global Compact, which is now functioning as the hub for promoting the spread of CSR, working through its regional networks in countries around the world.

These corporate initiatives are in the process of forging partnerships. The WBCSD and the UN Global Compact, for example, are forming a “coalition of coalitions” through which they intend to present the voices of the business world at various forums, such as the UN General Assembly and the World Economic Forum at Davos.

Even so, the corporate coalitions that are seeking to play an active role in promoting sustainable development still represent only a minority of the world’s companies, and they need to find ways to make their voices better heard. We can hope that joint endeavors by major international initiatives, each with its own strengths, will make it possible for the corporate sector to play a leading role in this field.

(2) Roles for emerging and developing countries

As globalization progresses and the world becomes a more level playing field, CSR must spread to emerging and developing countries in order for it to become more widespread and effective.

In the first decade of the new millennium, CSR spread mainly in the industrially advanced countries, thanks to initiatives like the UN Global Compact and the adoption international standards like the Global Reporting Initiative (GRI). Now it is spreading rapidly among the emerging and developing countries.

This trend was visible at the May 2013 Global Conference on Sustainability and Reporting in May 2013. Among the top 10 countries in the number of participating enterprises, alongside host Netherlands and other industrial countries, were emerging countries like China, Brazil, India, and South Africa. At the national presentations that were a new feature of this 2013 GRI conference, the participants from these countries explained their progress in CSR and reporting, drawing attention from many other participants. The theme of the South African presentation was the country’s adoption of the world’s first integrated reporting requirement, a subject that drew many questions from the floor.

The stronger presence of the emerging countries was a major change from the previous international GRI conference in 2010. Over the intervening three years, South Africa introduced a requirement for all listed companies to issue integrated reports, and in Brazil the stock market introduced a new index focused on governance. In India, CSR was added as a requirement under the Companies Bill, and in China, the number of enterprises issuing CSR reports topped 1,800 (see the table below).

The emerging and developing countries, which are playing a growing role in the world’s political and economic affairs, can be expected also to be increasingly prominent in the promotion of CSR.

 

Chinese Enterprises Issuing CSR Reports, 2001–13

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Source: China WTO Tribune.
Note: The 2013 figure is for January–September.

 

(3) A new approach to sustainable governance

The principal actors in CSR are corporations, but the corporate sector alone cannot produce major changes in society. In order to achieve a paradigm shift that will turn the tide, interaction among corporations and other stakeholders is essential, along with the collaboration arising from such interaction.

The ISO 26000 standard sets forth the concept of social responsibility not just for corporations but for all organizations. It is based on the idea of universalizing the CSR codes of conduct formulated in the context of corporate operations so as to promote collective action for sustainable development by all organizations. And in a first for the ISO, the working group that drew up this standard adopted a multi-stakeholder process.

We are entering a new age of sustainable governance, with engagement by multiple stakeholders collaborating and interacting in such a way as to give rise to innovations leading to social reforms and solutions that will promote sustainable development. We need to rethink the role of corporations in this new context. And we should implement stakeholder engagement with a view to achieving dynamic interaction among stakeholders aimed at finding solutions to our social issues (see the text box below).

 

Stakeholder Engagement

Definition: The process of being actively involved with one or more stakeholders through dialogue or other means, with the aim of achieving a mutually acceptable outcome, in the course of a corporation’s integration of its social responsibility into day-to-day practice.

Source: Keidanren, “Implementation Guidance on Charter of Corporate Behavior,” 6th version (September 2010).

 

Progressive companies like Unilever are already undertaking initiatives to draw their entire value chains into their social responsibility framework. Unilever’s “Sustainable Living Plan” calls on government agencies, NGOs, suppliers, consumers, research institutes, and other stakeholders to collaborate in achieving sustainable consumption. Corporations alone cannot change society, but through collaborative efforts like these, they can create the triggers for setting off social reforms and paradigm shifts. They should actively seek solid engagement with other stakeholders in the pursuit of common objectives.

 


[1] Tokyo Foundation, “CSR kigyo chosa deta shu” (CSR Corporate Survey Data), 2014, section 6, “CSR katsudo ni okeru gaibu soshiki to no kyodo no genjo” (The Current State of Collaboration with Outside Organizations in CSR Activities).

[2] Keidanren, “2011 nendo shakai koken katsudo jisseki chosa kekka” (Results of the Fiscal 2011 Social Contribution Activity Performance Survey), 2012, section II-4, “Kigyo to hieiri soshiki to no renkei” (Partnership between Corporations and Nonprofit Organizations).

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